Income Tax liability on net of Notice period deduction

[Pradeep Jain]

Sir,

We have deducted Notice period  amount from the employee who had not given the notice before leaving the company.

Now we wish to know that Income tax would be deducted on his taxable salary or after deducting the notice period amount from his salary.

Early action is highly appreciated.

Best  Regards

Pradeep Jain

[CS Swati D Rawat]

Supreme Court in the case of Commissioner Of Income-Tax, West Bengal II Versus Kalyanji Mavji And Co. [1980 (1) TMI 87 - SUPREME COURT]  held that notice pay is taxable in the year of receipt.

 Yes tax will be deducted after deducting notice pay.

AI Summary

Notice pay taxation: treated as taxable income when received; tax may be deducted net of notice pay. Notice pay constitutes taxable income in the year of receipt and forms part of the employee's taxable salary; accordingly, tax withholding is to be calculated after accounting for the notice pay deduction from the employee's pay.